Money Creation Process
Required Reserves = 100 (.10 x $ 1000)
Single Bank: Amount of money they can loan out (ER).
$1000 - 100 = $900
Banking system: Can create money by a MULTIPLE of its initial excess reserves.
1/RRR = 1/.10 = 10 $900 x 10 = $9000
ER x mm
Total Change in money supply as a result of the deposit:
Initial Deposit + Banking system created money = Total Change in MS
$1,000 + $9,000 = $10,000
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